What You Need to Know About Buying Your First Home

Purchasing your first home is often the single largest investment a person or a family will make in life. It can be an exciting, daunting and bewildering experience all in one. 

Buying a house is a commitment and it is important that you’ve done your research to make sure you are prepared for it. 

1. Your 20% initial deposit  - how essential is this?

Although some banks require one-fifth of the property price as a deposit, it is possible to get approved with less than 20%; however, in the current climate, it may prove more difficult. 

We get it - saving a large amount of money for a deposit can be tough, especially if you’re in a city like Sydney where the cost of living is relatively high. You can still get the property with less deposit, but chances are you’ll have high-interest rates on top of the lenders mortgage insurance (LMI).

If you do have the 20% deposit it will be a substantial saving on the total property cost as well as a lower interest rate and therefore more manageable and preferable repayment terms.  

2. Banks lending with high leverage

Some banks might be willing to stretch the Loan to Value Ratio for you - and that can be very attractive because it gives you the freedom to buy that dream first home you truly want. 

However, do proceed with caution and make sure you’re working the higher repayments into your budget going forward. The dream home becomes less of a dream if you’re struggling with ongoing payments. 

3. Additional property costs

You have to understand that aside from the total property price, there are still other charges you have to pay on top of that, such as stamp duty, transfer fees, government fees, charges for the pest and building report, conveyancing and solicitors fee. Not to mention the LMI if you don’t have the 20% deposit. 

Prepare for this so that you can make the payments you need whilst also putting money aside to save up for your deposit. If you are not prepared, it will chip into the deposit and it will reduce the amount that you actually put towards your purchase. 

4. Pre-approval is not a guaranteed mortgage

When a lender or bank offers a pre-approval, it only means that they are weighing your ability to pay the mortgage based on your income, expenditures and other liabilities such as debt and other loans. But, it still is not a guaranteed loan approval.

A fully approved loan only comes after your lender receives the signed contract, which they will then investigate to ensure that the property value stacks up against the proposed loan amount.

So make sure that when you sign the contract that it is conditional upon funding approval from the banks to the extent you need.

5. Take out insurances on the day you sign the contract

After signing the contract, you will still have around 30 days before you can get the keys and move in. 

No matter how long or short this transition period may be, make sure you take out insurance on the property immediately to protect you against any possible damages. 

Check with your solicitor or conveyancer to understand your position with the liabilities for damages that vary between states and territories. 

Here at Sandcastle Finance, we help ensure that you are armed with the information you need to help you make better decisions towards owning that first home sooner. 

Let us do the leg-work for you when it comes to finding a mortgage that is right for you. Book a free consultation call today